On Thursday, March 8, 2018, Duane Morris hosted the Bay Area Women Grow Signature Networking Event in our San Francisco office. Our panel speakers included Duane Morris partner Jennifer Briggs Fisher, who specializes in providing regulatory and compliance advice to cannabis companies, and Nicole Elliott, the Director of the San Francisco Office of Cannabis. The panel was moderated by Women Grow Co-Founder Jazmin Hupp.

Our panel speakers addressed the cannabis business permitting process in San Francisco, the equity applicant program, requirements for licenses from the State of California, and legal and compliance considerations for cannabis businesses. It was a fantastic way to celebrate International Women’s Day!

On January 1, 2018, hundreds of California residents lined up outside just licensed cannabis retail dispensaries to purchase newly legal recreational marijuana. The founder of Buddy’s dispensary in San Jose, which holds one of California’s first recreational marijuana licenses, described it as the busiest day in the dispensary’s history. The California cannabis industry is projected to reach profits of $3.7 billion dollars in 2018 alone. Projections indicate there could be up to 4 million consumers of recreational marijuana in California. This huge opportunity has many new entrepreneurs, including celebrities like Mike Tyson, pursuing the cannabis business.

Under the new law, Californians over the age of 21 can now possess up to an ounce of marijuana, eight grams of marijuana concentrate, and grow up to six plants at home for their personal use. While public consumption is still banned, the new framework gives recreational users new flexibility. Those on the business side of recreational cannabis, however, still have a lot to consider before diving into this new market.

This is especially true given the news today that Attorney General Jeff Sessions is rescinding an Obama-era directive discouraging enforcement of federal marijuana laws in states where cannabis is legal. We will know more about how this decision will impact the California market after the announcement is officially made by AG Sessions later today. For now, we will provide an update on the first week of recreational cannabis sales in California.

On December 15, 2017, the California Bureau of Cannabis Control granted the first license for the sale of adult use marijuana in California to a San Diego dispensary. Torrey Holistics, located in Sorrento Valley, has sold medicinal marijuana since 2015. The dispensary also received a new license to continue the sale of medicinal marijuana.

The adult use retailer license received by Torrey Holistics is one of ten licenses, including one to another San Diego dispensary, Urbn Leaf in Linda Vista, for the sale of adult use marijuana granted by the California Bureau of Cannabis Control since the agency launched its online licensing system earlier in December. The licenses received by Torrey Holistics and the other medicinal and adult use retailers are temporary though. After 120 days, a permanent license must be obtained by the businesses. The licenses also do not go into effect until January 1, 2018.

For more information or questions on licensing of retailers of medicinal and adult use in California, please contact Joe Machi in our San Diego office or another member of the Duane Morris Cannabis Group.

While most of us were hitting the beaches over the summer, California lawmakers updated California’s regulations for the cannabis industry when they passed California Senate Bill 94, or the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA” or “the Act”). MAUCRSA repeals the Medical Cannabis Regulation and Safety Act and amends the Adult Use of Marijuana Act, resulting in MAUCRSA regulating both adult use (i.e. recreational) cannabis businesses and medicinal cannabis businesses. For purposes of the Act, an adult is considered to be anyone 21 years of age or older. Bus. & Prof. Code § 26001.

While the Act provides a comprehensive regulatory framework for key segments of the cannabis industry, it also raises new questions and concerns that will require further clarification from, and coordination with, California lawmakers and agencies. The discussion below addresses some of the key provisions of the Act.

California took the next big step in establishing its legal cannabis market. It officially launched its online licensing system and is now accepting applications for commercial cannabis licenses for retailers, distributors, microbusinesses, testing laboratories and cannabis events. The online system can be used by applicants to easily apply for a temporary and annual commercial cannabis license, submit payments and track the status of an existing application.

All business owners applying for a medical and/or adult use cannabis business license must be registered and have an active account on the licensing system. In addition, those individuals or companies that are considered “owners” of the applicant business will need to register as well in order to submit the necessary information that is required to be disclosed by each “owner.”

Cultivators must apply for a cultivation license with the California Department of Food and Agriculture’s CalCannabis Cultivation Licensing program. CalCannabis expects to launch its online application process later this month. The California Department of Public Health is currently accepting paper applications by mail or email for manufacturing licenses.

On November 16, 2017, the California Bureau of Cannabis Control published emergency regulations governing both the medical and the adult-use cannabis industries in California. Below are the highlights of the emergency regulations and how they may impact distributors of cannabis products.

On November 16, 2017, the California Bureau of Cannabis Control published emergency regulations governing both the medical and the adult-use cannabis industries in California. Below are the highlights of the emergency regulations and how they may impact adult-use and/or medicinal retailers, or dispensaries as they are more commonly known.

Last Thursday, California’s three cannabis licensing agencies published emergency regulations to govern both the medical and adult-use cannabis industry in California under the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) (Bus. & Prof. Code 26000 et seq.).

The California Department of Food and Agriculture (CDFA), through its CalCannabis Cultivation Licensing Division (CalCannabis), is the licensing authority for all cannabis cultivators in California. CalCannabis is also developing the track-and-trace systems that will record the movement of cannabis through the supply chain from cultivation to sale. Below are the highlights of the CDFA’s emergency regulations and how they may impact growers.

On November 16, 2017, California’s three cannabis licensing agencies published emergency regulations to govern both the medical and adult-use cannabis industry in California under the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) (Bus. & Prof. Code 26000 et seq.). The regulations published by the Bureau of Cannabis Control, the Department of Food and Agriculture and the Department of Public Health cover, among other things, cultivating, manufacturing, testing, growing, packaging and potency requirements.

As California gears up to issue the first set of adult-use cannabis licenses on January 1, 2018, state and local taxes on adult-use cannabis may reach as high as 45% in some parts of the state. According to a recent report by Fitch Ratings, cannabis consumers are expected to pay a sales tax ranging from 22.25% to 24.25%, which includes an excise tax of 15%, and additional state and local sales taxes ranging from 7.25% to 9.25%. Local cannabis businesses will have to pay taxes ranging from 1% to 20% of gross receipts, or $1 to $50 per square foot of cannabis plants, and farmers will be taxed $9.25 per ounce for flower, and $2.75 per ounce for leaves.

These rates are considerably more than in other states that have already legalized adult-use cannabis. Colorado and Nevada, for example, each have a tax rate of 36%. Oregon comes in at 20% and Alaska has a rate of up to 20%. Massachusetts, which legalized adult-use cannabis, and should begin retail cannabis sales in July 2018, is expected to have a tax rate of 24%. Maine has not established a tax rate yet. Washington is the only other state with higher taxes, at an effective tax rate of approximately 50%.

The legitimate cannabis industry in California has a projected value of $7 billion with the potential to collect $1 billion per year in tax revenue. However, industry leaders in California believe that a higher effective tax rates on consumers, retailers and growers could potentially divert sales to the already well-established cannabis black market. For example, the black market price for an eighth of an ounce of cannabis is approximately $20, as opposed to approximately $50 at a licensed dispensary. High taxes, coupled with a cheaper source of product, could ultimately hamper California’s efforts to legitimize the cannabis industry. However, since legal cannabis is subject to stringent quality assurance testing which will be overseen by the California Bureau of Cannabis Control, consumers may be willing to pay a premium to ensure that they are getting a better, safer product than they would on the black market.

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Cannabis Industry

Duane Morris attorneys in offices throughout the U.S. have extensive experience with the wide array of issues attendant to legal cannabis business activities, including licensing for cultivation, processing and dispensing; litigation; banking and finance; raising and deploying capital; protecting intellectual property; real estate development; public company representation and SEC filings; land use and zoning; healthcare and research; and taxation.